Help to Buy: A moronic policy
In the words of a leading City figure: "I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business.".
Help to Buy should really be called ‘Help to Sell’, as the main ‘winners’ will be developers and existing homeowners who will find it easier to sell at inflated prices. Pumping more money into a housing market with chronic under-supply has one sure-fire outcome: pushing up house prices. At best it may help a small number of new buyers, but it will mean housing becomes more expensive for all those that follow.
The major problem faced by first time buyers is high prices and the daunting levels of debt needed to enter homeownership. Of all the policies you could think of to tackle this, it is harder to think of a riskier or more short termist policy than Help to Buy.
House prices across much of the UK are already unaffordable for young adults and families with ordinary earnings, so this extra upward pressure on prices will create far bigger problems in the future.
If the government is happy to take on exposure to the housing market, it would be much wiser to invest directly in building more houses, with the focus on targeting areas with the most chronic housing shortages.